Question

Marilyn collects old dolls. She purchases a doll for $450. Research shows the doll's value with increase by 2.5% each year.

Assuming the doll's rate of appreciation remains the same, what will be value of the doll in 20 years, to the nearest penny?

Answer 1

`\$737.38`

Explanation:

we know that

The equation of a exponential growth function is given by

`y=a(1+r)^x`

where

y is the value of the doll

x is the number of years

a is the initial value

r is the rate of change

we have

`a=\$450\\r=2.5\%=2.5/100=0.025`

substitute

`y=450(1+0.025)^x`

`y=450(1.025)^x`

What will be the value of the doll in 20 years?

For x=20 years

substitute in the equation

`y=450(1.025)^(20)=\$737.38`